OMG No Not Deflation!!!

God this seems so obvious, why can't they see that there is no deflation threat? As I've said from the beginning, evaporation of made-up capital that should not have been made-up in the first place and deflation are two completely different things, why is it so difficult for these Fed geniuses to see that?

Federal Reserve Bank of St. Louis President James Bullard said the central bank should resume purchases of Treasury securities if the economy slows and prices fall rather than maintain a pledge to keep rates near zero.

“‘The U.S. is closer to a Japanese-style outcome today than at any time in recent history,” Bullard said, warning in a research paper released today about the possibility of deflation. “A better policy response to a negative shock is to expand the quantitative easing program through the purchase of Treasury securities.”

I think the Fed's easy money policy is more dangerous than the specter of deflation at this point, at least until the economic rocket scientists get together and redefine what we are currently experiencing.

Until that happens, I guess we'll just keep shoveling money into the hole and hope that works.

It's awesome that the government is fighting for products to be more expensive. How does that not get through to people? Oh and when I meant government I meant our sole rulers at the Fed, not the puppet organization of the Executive, Legislative and Judicial branches of the former United States of America.

"evaporation of made-up capital that should not have been made-up in the first place and deflation are two completely different things"

No, they're not. Evaporation of made-up capital is what deflation looks like under a debt-based fiat currency system. It's the flip side of the process that's given us *inflation* for the past 100 years; I don't think anybody's arguing that that inflation wasn't "real" inflation.

Under a system of sound money, deflation is price deflation, not monetary deflation, and it's a good thing. Under a system like ours, which can only mathematically function properly as long as the overall debt load is increasing, deflation is bad news. But so is inflation.

Excellent point, Xtapol... I'm talking in accounting terms more than economic ones, in that we built up this invisible capital when times were "good" and now when Bernanke cries "deflation!" he's really crying out to make all that fake money come back and infect the system with its jacked up prices so, as you said, the system can sustain itself. Or rather so the debt service payments can keep being paid to sustain the perpetual debt required to feed a fiat system.

It's not just jacked up prices, though - all that funny money is in the form of loans, backed by real assets. When we're in a deflationary environment, the economy as a whole cannot possibly serve its debt, so said assets are systematically funneled to the banks as they are repossessed.

God, I hate talking about this. All it does is remind me that it's the biggest scam in the history of mankind.